I think people start realizing that increasing block size limit is not a solution but a new problem (e.g. http://keepbitcoinfree.org).

If block size limit is kept, I see no reason why bitcoin should fail.

The scenario that tx fees increase long-term and online wallet services start getting an increasing share in small "off-blockchain" transactions, makes sense to me as a natural and healthy evolution. Also, confirmation times of 10min are no problem then any more for shopping at retailers around the corner.

Also, all the infrastructure built now for Bitcoin won't be built for Alt-Coins soon - BTC is well ahead here.

The recent days and weeks and months an ever-increasing number of alt-coins has enteredflooded the market. This does not reduce BTC value as it seems, but it seems to dilute the value of all other alt-coins. It appears that the market-cap of all altcoins together is one thing, and the market cap of Bitcoins alone is another thing (my impression - cannot prove it though). If this is true, it would show that people start realizing that alt coins are just copies for making their creators rich quickly, without any real long-term vision.

I have not yet seen a convincing Alt-Coins, most are dumb copies and some are conceptually interesting but not very transparent in terms of who is behind them, sometimes there seems to be just a single person (like PPC), which does not really create trust.There is an initiative for "Netcoin" (MC2) - this appears to really become a community-project rather than a new single-person project, however some technical questions are yet unanswered in its concept - will be interesting to follow...

I think people start realizing that increasing block size limit is not a solution but a new problem (e.g. http://keepbitcoinfree.org).If block size limit is kept, I see no reason why bitcoin should fail.

This video is FUD designed to further a personal agenda which is to be the renowned architect of the 3rd-party systems, which 99% of Bitcoin users will be forced to use when they are priced away from the blockchain.

The essence of the video is that decentralization is at risk. Evidence is showing otherwise:Bitcoin has a record number of active nodes, 350,000+, and this is increasing even as average block size is increasing.http://bitnodes.io/

The recent days and weeks and months an ever-increasing number of alt-coins has entered flooded the market. This does not reduce BTC value as it seems, but it seems to dilute the value of all other alt-coins.

One of the alt-coins will have a flexible block size limit. If Bitcoin users find their transactions no longer work they will quickly use the alt coin which does work. Markets cleave to the best technology. Think Tesla's AC dominating world electrical systems instead of Edison's DC which has a niche role. Bitcoin has one chance for glory and a rigid block size limit will kill that chance.

I think people start realizing that increasing block size limit is not a solution but a new problem (e.g. http://keepbitcoinfree.org).If block size limit is kept, I see no reason why bitcoin should fail.

This video is FUD designed to further a personal agenda which is to be the renowned architect of the 3rd-party systems, which 99% of Bitcoin users will be forced to use when they are priced away from the blockchain.

The essence of the video is that decentralization is at risk. Evidence is showing otherwise:Bitcoin has a record number of active nodes, 350,000+, and this is increasing even as average block size is increasing.http://bitnodes.io/

The recent days and weeks and months an ever-increasing number of alt-coins has entered flooded the market. This does not reduce BTC value as it seems, but it seems to dilute the value of all other alt-coins.

One of the alt-coins will have a flexible block size limit. If Bitcoin users find their transactions no longer work they will quickly use the alt coin which does work. Markets cleave to the best technology. Think Tesla's AC dominating world electrical systems instead of Edison's DC which has a niche role. Bitcoin has one chance for glory and a rigid block size limit will kill that chance.

Hmm, maybe the optimum block size limit is not 1 MB, but "infinity" is certainly the worst choice of all. It is also clear that at some point it will have to become limited... actually I came to this conclusion myself w/o personal agenda before I saw http://keepbitcoinfree.org, so it appeared quite logical to me. Anyway, one has to be very cautious about the pros and cons of increasing, or keeping, the block size limit, I think.

Remark: "http://bitnodes.io/" is interesting - seems that Finland, Norway, Sweden, Germany and Netherlands have the lead when relating the nb of nodes to the population. Interesting when considering where these countries are positioned in the world financial crisis.

Hmm, maybe the optimum block size limit is not 1 MB, but "infinity" is certainly the worst choice of all. It is also clear that at some point it will have to become limited...

1MB and "infinity" are the extremes.There is a middle-ground which is a market-driven block size. This is achieved by a fees-market where there is competition for block-space. This was Satoshi's original vision, which still seems very sensible (not just because Satoshi liked it). The 25 BTC block reward is relatively high compared to fees, so a viable fees market won't occur until blocks are about 20 to 50Mb in size. Which is large but not outrageously so. The 1MB limit makes the fees market stillborn, and never gives this essential feature of Bitcoin a chance to develop.

Hmm, maybe the optimum block size limit is not 1 MB, but "infinity" is certainly the worst choice of all. It is also clear that at some point it will have to become limited... actually I came to this conclusion myself w/o personal agenda before I saw http://keepbitcoinfree.org, so it appeared quite logical to me.

Would you care to argue for your position, instead of just stating it?

It's not at all obvious to me why no block size limit is "certainly the worst choice of all". Nor is it clear to me "that at some point it will have to become limited".

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Anyway, one has to be very cautious about the pros and cons of increasing, or keeping, the block size limit, I think.

Hmm, maybe the optimum block size limit is not 1 MB, but "infinity" is certainly the worst choice of all. It is also clear that at some point it will have to become limited... actually I came to this conclusion myself w/o personal agenda before I saw http://keepbitcoinfree.org, so it appeared quite logical to me.

Would you care to argue for your position, instead of just stating it?

It's not at all obvious to me why no block size limit is "certainly the worst choice of all". Nor is it clear to me "that at some point it will have to become limited".

First of all, a lot of arguments (good argumetns I think) are given at http://keepbitcoinfree.org. It is easy to read and understand, so no point to re-iterate the arguments here. Everybody can read it and think about it for oneself.

In my own words, in essence if block size is unlimited, everyone can arbitrarily spam the blockchain without any risk and negligible cost, thereby driving up costs of operating a node of the bitcoin network and extremely accelerating the growth of blockchain size. As a result, only big players will remain as miners, creating a strong drive towards monopolizing the bitcoin network. This is the worst that could happen. Proponents of infinite or very large block size limit either do not see this, or have the interest of destroying bitcoin.

So I think an unlimited block size (or a too high limit) looks attractive short-term, but is not sustainable (i.e. not viable long-term), and since this can be seen well in advance, also mid-term adoption of bitcoin by the people is at risk, because people would see that bitcoin is at risk long-term.

PS: Moreover, long-term movement of transactions to off-blockchain systems is not a bad thing I think, because these operators would serve the non-tech-savvy masses (who don't know how to create safe cold storage etc.), while the minority of tech-savvy people (like >95% in this forum) may continue using the "proper" block chain, at least to a reasonable extend.

PS: Moreover, long-term movement of transactions to off-blockchain systems is not a bad thing I think, because these operators would serve the non-tech-savvy masses (who don't know how to create safe cold storage etc.), while the minority of tech-savvy people (like >95% in this forum) may continue using the "proper" block chain, at least to a reasonable extend.

Unfortunately Michael, that's the problem I have with a low inflexible block limit (like 1MB), because it is fees which will determine who gets their transactions onto the blockchain. In the vision of keepbitcoinfree it will only be the large 3rd party banks and services which can afford the high fees (in the order of $20 per transaction at least). The >95% of this forum, tech-savvy types, will be effectively banned from the blockchain. Then we can ask: "Who will run a Bitcoin node to maintain the decentralized network, when they can't afford to use the blockchain for everyday transactions?" Answer. No one. So the network becomes very centralized because only the bitcoin banks and 3rd party systems will run full nodes.

further a personal agenda which is to be the renowned architect of the 3rd-party systems

As far as I can tell this is a slanderous personal attack. It is unsupported by an information available to me. I must insist that you actually substantiate it or withdraw it.

Seriously, this is very uncool. If you don't believe you arguments are strong enough to stand on their own without hypothesizing evil on the part of your counter-parties then you should keep your views to yourself. If people are attacked in this manner we _cannot_ have a civil conversation on this stuff. No one but pure politicians will be willing to earnestly debate the subject when there exists a threat of character attacks like this.

If anything, if you want to attack Peter Todd and friends on this basis you should be criticizing them for spending too much time promoting tools as solutions to scaling relative to the amount of time they've spent actually creating them. Lots of yap yap, but if this stuff is to be the great salvation against uncomfortable tradeoffs between scale and decentralization... show us the code!

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The essence of the video is that decentralization is at risk. Evidence is showing otherwise:Bitcoin has a record number of active nodes, 350,000+, and this is increasing even as average block size is increasing.http://bitnodes.io/

The number of stable listening nodes is constant-to-decreasing based on the actually data available (the data collected by the DNS seed collectors). I can only imagine that they're getting 350,000 based on counting up addr messages, which is a methodology that doesn't work and gives gibberish results. Their data from actually connecting to nodes shows numbers like 6000 which sounds more realistic. I certainly wish the big numbers were true, but I don't think they are.

Thats neither here nor there, as I don't think the argument is that there is currently a problem... I point it out because I don't think the discussion is served by factually weak arguments.

That said, I personally think there currently are decentralization problems: For one, bitcoin.org will so no longer recommend bitcoin-qt: There is tremendous pressure to only recommend SPV clients and the new site when launched did so, and only stopped because multibit was constantly locking up at the time and had many other issues. Blockchain sync stats appear to be suggesting, by the upward slope for the oldest blocks, that a significant fraction of all nodes that attempt syncing never finish. Those issues are indirect— but when you consider that compromising _two_ computers (or their operators) is currently enough to control >>50% of the hash-power you simply cannot say that we don't currently have severe decentralization problems.

Though it's not clear to me to what degree this is historical accident vs scaling induced, we'll know more once some new tools for improving mining decentralization come out in the not too distant future.

further a personal agenda which is to be the renowned architect of the 3rd-party systems

As far as I can tell this is a slanderous personal attack. It is unsupported by an information available to me. I must insist that you actually substantiate it or withdraw it.

Withdrawn. I made the comment because of frustration that the debate on this crucial issue was moved from a civilized thread to a youtube video. I respect Peter's intellect, yet remain completely puzzled at the naive viewpoint that the video presents. He makes no attempt to measure decentralization, yet this is crucial to its message. It is only pieces of information, such as what you posted just now, which aids building an overall picture within which decisions on the block size can be made.

Withdrawn. I made the comment because of frustration that the debate on this crucial issue was moved from a civilized thread to a youtube video. I respect Peter's intellect, yet remain completely puzzled at the naive viewpoint that the video presents. He makes no attempt to measure decentralization, yet this is crucial to its message. It is only pieces of information, such as what you posted just now, which aids building an overall picture within which decisions on the block size can be made.

Thank you! And indeed. Lots more information is required all around. Some will be easier to get than others.

PS: Moreover, long-term movement of transactions to off-blockchain systems is not a bad thing I think, because these operators would serve the non-tech-savvy masses (who don't know how to create safe cold storage etc.), while the minority of tech-savvy people (like >95% in this forum) may continue using the "proper" block chain, at least to a reasonable extend.

Unfortunately Michael, that's the problem I have with a low inflexible block limit (like 1MB), because it is fees which will determine who gets their transactions onto the blockchain. In the vision of keepbitcoinfree it will only be the large 3rd party banks and services which can afford the high fees (in the order of $20 per transaction at least). The >95% of this forum, tech-savvy types, will be effectively banned from the blockchain. Then we can ask: "Who will run a Bitcoin node to maintain the decentralized network, when they can't afford to use the blockchain for everyday transactions?" Answer. No one. So the network becomes very centralized because only the bitcoin banks and 3rd party systems will run full nodes.

Solex, your arguments do not convince me at all.

First, the "20 USD" that you state is very far-fetched, way too high in my impression. If we consider that the "3rd party banks" (or "online wallet providers", as I would call them) mainly use the blockchain to transfer funds between them, just like in the fiat money system today private banks carry out electronic money transfers of real central bank money between each other, then the capacity of the blockchain would not even be close to exhausted from this sort of transaction. Private banks have to make such transaction today only once per day, so the "bandwidth" for such transactions is enormously low, and enough bandwidth would still be left for normal business bitcoin transactions.

But even if all business and private transactions were practically "banned" from the blockchain due to these 20 USD fees, I would in the end still see a big difference and advantage compared to today's fiat world: In today's world, private people and businesses have no access to electronic central bank money at all (just non-electronic "cash" is central bank money). The rest of today's electronic "money" is actually just liabilities of banks towards their customers. In the "new world", private people and businesses and banks would have equal access to "real" money (the "primary blockchain-bitcoins"), and no private person needs to put his life-time savings into bank accounts with consequences as we have recently seen in Cyprus.

Secondly and more importantly, I would draw exactly the opposite conclusion than you w.r.t decentralization of miners (=bitcoin network nodes)! Think about it, please. You seem to confuse the concepts of bitcoin USERS and bitcoin MINERS, or at least you seem not to separate these two concepts. If transaction fees grow to an equivalent of 20 USD/transactions as you suggest, then this means in tendency a centralization of USERS, i.e. mainly those who transfer large amounts of bitcoins (like online wallet service providers, private persons buying real estates, or big companies) will have the "privilege" to use the blockchain instead of off-blockchain transfers of liabilities (=equivalent to today's bank transfers). But this is of no relevance for the miners! From the MINER point of view, there is a certain amount of traffic going on, the miner does not care who is generating this traffic, whether a bank or a private person. Thanks to the high TX fees it is really profitable to set up an own miner for many people. And since the block size limit is relatively low, the bitcoin network is still scalable, i.e. HW expenses for setting up a miner are low, so many people will decide to setup miners --> we get the desired DEcentralization effect in terms of Miners=bitcoin network nodes.

In the other case (no block size limit), we have the opposite effect: Short-term, USERS will continue to be able to use the blockchain at low tx fees due to low competition between transactions. So miners will have lower revenues, which will mean that many miners are going to switch off. As time proceeds, the blockchain increases quickly, meaning higher and higher memory requirements for miners. This will be another negative cost factor for miners that will cause even more miners to switch off. --> we get the UNdesired centralization effect in terms of Miners.

To summarize:(*)Limited Block Size promotes...

...Decentralization of MINERS (due to higher TX fees and lower blockchain size, making mining more profitable), but

...Centralization of USERS (due to higher TX fees, more users or services get incentive to go "off-blockchain")

(*)Unlimited Block Size promotes...

...Centralization of MINERS (due to exploding blockchain size=higher mining hardware costs and less profitable mining due to lower TX fees), but

...Decentralization of USERS (due to lower TX fees more users will continue using the blockchain directly)

So one has to make the best compromise. Clearly, if block size is too low (e.g. only ONE transaction per block, to make an extreme example), the network will become useless, people will loose interest, nobody will use it, and bitcoin dies. So in that sense we should be worried about Centralization of USERS.But the current block size limit or 1 MB corresponds to ca. 1000 transactions per block (maybe 2000...), which is far from this point, as the current network already proves. So Centralization of Users is not to worry about.

Rather we should be worried about the Centralization of MINERS, which appears to be the main threat to the bitcoin network right now.

As long as tx fees are so low that services like SatoshiDice still operate over the blockchain, there is certainly no need to increase the block size limit. Once we approach the block size limit and SatoshiDice is "squeezed out", and we hit the blocksize limit again, people will first start to become more cautious about their transactions! I know it from myself, I used to make lots of "fun" and "test" transactions in the past, because they were so cheap. If Tx costs rise from let's say 0.5 cent to 10 or 20 cent, I will certainly reduce my unnecessary transactions substantially (which make up certainly more than 90% of my transactions today) without really feeling that the bitcoin network has become less valuable for me in essence. Other users will do the same. So there will be a natural evolution towards use of transactions only where really needed, and this is good. There is absolutely nothing wrong with the vision that in a very far future (assuming that bitcoin is really becoming the dominating currency in the world one day - which is far from certain) the vast majority of payments (like shopping etc.) are done off-blockchain via service providers. However, if we destroy the network before due to miner scalability and decentralization problems, bitcoin will certainly never reach that point.

If anything, if you want to attack Peter Todd and friends on this basis you should be criticizing them for spending too much time promoting tools as solutions to scaling relative to the amount of time they've spent actually creating them. Lots of yap yap, but if this stuff is to be the great salvation against uncomfortable tradeoffs between scale and decentralization... show us the code!

With enemies like you, who needs friends?

Of course, I can in turn respond that advocacy rather than code is a response to getting attacked for promoting my specific off-chain systems like fidelity-bonded banks - the more people who realize this is a problem and work on solutions the better. If they come up with solutions that are drastically different from what I've proposed, all the better, so long as they actually work. Personal attacks just make this inherently highly political argument even worse.

Thats neither here nor there, as I don't think the argument is that there is currently a problem... I point it out because I don't think the discussion is served by factually weak arguments.

Yup. It's funny listening to the "but we're decentralized now!" argument, because that's exactly the conversation I had with the people at stonecanoe when I was making the video. Specifically we thought it was hilarious that we were essentially making an advocacy video where the "call to action" message for much of the target audience was "do nothing and everything will be ok"

SPV clients and big mining pools are a concern, but overall Bitcoin is fairly decentralized now. I want to keep it that way.

In the other case (no block size limit), we have the opposite effect: Short-term, USERS will continue to be able to use the blockchain at low tx fees due to low competition between transactions. So miners will have lower revenues, which will mean that many miners are going to switch off.

I guess that larger blocks would have more total fees, despite the lower average fee. Consider block chain transactions as a service. The cheaper the service is, the greater is the turnover, because more people pay to the Bitcoin network and less to other payment processors. Of course, that holds true down to a certain extreme; a free service has zero turnover in terms of money. So, as long as fees are above some threshold, transaction volume is not a concern for miners. Even though their expenses increase (not significantly), they are still paid for the information they process. Additional gigabytes of required storage will not be a problem for miners. Most of a typical miner's expenses go to SHA2 bruteforce, which has no relation to the transaction volume.

Do we need a hard block size limit to keep fees above the profitability threshold? I think, no. Miners are free to choose what transactions to include in their blocks. A reasonable miner will just drop any transactions that don't worth inclusion. Unreasonable miners and attackers can produce blocks with lots of trash, but hopefully these will be too rare to affect other miners.

So, miners are unlikely to suffer from increased transaction volume. And who does suffer? Non-miner nodes do. They don't receive a compensation for their processing power and occupied storage. Block size limit is to benefit of users who run their own nodes. Setting up new nodes becomes harder with time, and increase in transaction volume makes it considerably worse. If large number of nodes is important for Bitcoin network health, we will need to motivate full-node operators somehow. Until we have a solution, we better keep transaction volume low. By the way, some foresee that most of full nodes will be run by miners and businesses that profit from Bitcoin in some other way.

Even though their expenses increase (not significantly), they are still paid for the information they process. Additional gigabytes of required storage will not be a problem for miners. Most of a typical miner's expenses go to SHA2 bruteforce, which has no relation to the transaction volume.

Why would you say this?

My ancient 2.83 GHz Core 2 Quad can currently handle around 3000 transactions per second. If we assume an average transaction size of 250 bytes, that's a data rate of 730 KB/s, or 1.8 TB per month.

So your average old CPU can chug along for years without an upgrade, but you will have to buy a new 2 TB HDD every month.

That is a project that promises to make secure verification of new transactions and blocks possible without having the full block chain stored locally. It is also planned to use additional channels (BitTorrent) for distribution of old blocks to syncing nodes. Thus, the need in full nodes in their current form may be reduced. However, it will require a motivation for maintaining an additional block chain and distributing old data. Am I right?

First, the "20 USD" that you state is very far-fetched, way too high in my impression...

The track record of banks charging as much as they can for wire transfers is shameful. Between $15 and $45 is cited here:http://en.wikipedia.org/wiki/Wire_transfer#Regulation_and_priceThe standard fee for international wire transfers is generally $25. No reason to expect the profit motive to weaken for Bitcoin banks. Also, if people pay this much now then blockchain fees could reach this level too.

The wire business should be bread and butter for Bitcoin to steal, but millions of such fiat transfers are done every day, well outside the current network capacity (even if SatoshiDice-like volume were zero, instead of 50% of current volume). Note that gamblers have a high tolerance to fees and Bitcoin may well prove to be a huge hit for the whole online gambling industry which could easily saturate the blocks by itself.

I have not yet advocated infinite blocks, just supported the idea of a flexible limit that might help the fees market develop by block space rationing. Until recently Bitcoin operated with a block limit that was effectively infinite because the number of transactions was far too small to trouble it. Then a soft-limit of 250KB was tried (to see how the network behaved), as well as 500KB later. As soon as the 250KB blocks approached saturation the limit needed raising because of users having unreasonable delays. Fees are rising but probably due to client changes rather than block space rationing.https://blockchain.info/charts/transaction-fees?showDataPoints=false&timespan=&show_header=true&daysAverageString=7&scale=0&address=

To be clear, I am all for decentralization as well. This is not monolithic. Miners are one aspect, but also non-mining peering/propagating full nodes are another. It is the latter case which is hard to measure well. If there are 6,000 such full nodes then this seems much healthier than the mining situation where one miner has 25% of the network hashing power: http://www.asicminercharts.com/, let alone that only a few pools hash most of the blocks.

So one has to make the best compromise. Clearly, if block size is too low (e.g. only ONE transaction per block, to make an extreme example), the network will become useless, people will loose interest, nobody will use it, and bitcoin dies. So in that sense we should be worried about Centralization of USERS.But the current block size limit or 1 MB corresponds to ca. 1000 transactions per block (maybe 2000...), which is far from this point, as the current network already proves. So Centralization of Users is not to worry about.

One thing I don't get is the following:

You say that the current block size limit of 1 MB is not a problem, because we're only seeing ~100KB blocks on average. But how is that an argument? If we just raise the size limit every time there is demand for it, why even have it in the first place? What purpose does it serve if we're going to adjust it manually anyway when transaction volume starts budging against the limit? A continually adjusted limit is not a limit.